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WSJ: Federal Health Exchange Approved Fake Claims

Stephanie Armour | July 16

The federal exchange set up under the Affordable Care Act allowed fictitious applicants to maintain coverage and re-enroll this year, according to a report by a congressional watchdog group that raises questions about the marketplace’s ability to detect fraud.

The exchange,, last year approved 11 fictitious applications submitted in an undercover operation by the Government Accountability Office, according to the report released Wednesday by the agency.

The fake applicants all maintained coverage through 2014 and were re-enrolled this year despite use of fabricated documents or missing information, the report said.

Six applicants received notices that they were being terminated, the report noted, but after GAO investigators posing as the consumers called the federal exchange, five of the six were reinstated with larger subsidies to defray premium costs. The sixth application was pending as of April, when the undercover activity ended.

The report is likely to escalate criticism of the health law. Republicans jumped on the findings by the nonpartisan agency as a sign isn’t set up to detect fraudulent applicants.

“Not only does this negligence enhance the likelihood for abuse of taxpayer dollars, but it also calls into question the legitimacy of the health law’s enrollment numbers and challenges the integrity of the website’s security checks,” said Senate Finance Committee Chairman Orrin Hatch, (R., Utah).

The Senate Finance Committee will hold a hearing Thursday to discuss the agency’s findings.

The report found that the Centers for Medicare and Medicaid Services, which oversees implementation of the 2010 health law, isn’t required to detect fraud and that CMS officials acknowledged “limited ability” to respond to fraud attempts. CMS told the GAO that there haven’t been signs of a significant level of fraud.

CMS also told the GAO that subsidized policies may have remained in effect in 2014 because the agency directed contractors not to terminate policies or subsidies if an applicant submitted any documentation.

The marketplace has a multi-layer verification process, including checking an application filer’s identity and eligibility in real-time, according to Health and Human Services, the parent agency of CMS.

Enrollment was discontinued for about 226,000 consumers who failed to produce sufficient documentation of their citizenship or immigration status at the end of March 2015.

“Over the last year, we have made continuous improvements to our processes and communications for those with a data matching issue as we work to bolster the integrity of the process,” said Meaghan Smith, a HHS spokeswoman. “We look forward to working with the GAO as we continue to make additional improvements.”

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